Honest Tea Hits a Billion

Honest Tea Half and HalfFor Honest Tea, the math works out like this: 16 years + 22 million pounds of organic ingredients = a billion beverages.

Yes, of course, the distribution muscle of The Coca-Cola Co. had a lot to do with Honest Tea crossing the major milestone, but we’ll get to that in a moment.

On Friday, Honest Tea announced that it has sold its billionth beverage since the brand’s debut in 1998. Back then, co-founders Seth Goldman and Barry Nalebuff launched the organic tea brand in a few dozen Whole Foods stores, eventually selling 300,000 bottles in its first year. By 2007, Honest Tea products were available in 15,000 retail locations, and had sold 112 million bottles in its first decade in business.

Certainly, sales in those first 10 years were an impressive testament to brand resonance and mounting demand for organic beverages. But to get to a billion beverages sold, Honest Tea would need a partner that could deliver its products to a much wider map of consumers.

Enter Coke.

Coke’s Venturing and Emerging Brands (VEB) unit made an initial investment in Honest Tea in 2008, and Coke exercised its option to purchase the brand three years later. Since VEB’s investment, availability of Honest Tea has grown to more than 100,000 outlets, with nearly 900 million additional units sold.

“In the first year, we were in… maybe 30 stores,” Goldman told BevNET. “Now we’re in over 100,000. So we certainly accelerated the accessibility of organic beverages, and then, obviously, the fact that the products are still on the shelf — and growing — shows that we’ve also helped accelerate the acceptance of [organic drinks].”

Goldman noted while Coke gave Honest Tea the ability to achieve far greater distribution of its products, he and his team already had established relationships with several organic tea growers, something that Coke, while certainly a large buyer of conventional tea leaves, lacked. However, Honest Tea’s relationship with the cola giant gave the brand a level of clout that it somewhat lacked in its early days.

“When I would go to a meeting with a tea garden or other organic commodity growers back in the day, it was this guy who started this company out of his house saying, ‘Hey, I really hope you guys will convert your gardens to organic or Fair Trade, because that’s something we’re interested in,’” Goldman said. “They’d say ‘this is seems a nice guy, [but] we have a lot of other things going on.’”

“Now when I go to these gardens, and they understand this is a representative of the Coca-Cola Company, it makes a different impression,” he continued. “We’ve seen more gardens converting to organic, more gardens converting to Fair Trade. That’s good for us from a supply chain perspective; we don’t want to be dependent on one garden. And — without sounding too grandiose — [it’s] good for the world.”

Goldman also noted the addition of a PET package in 2004 as being key Honest’s distribution expansion (“it fit more naturally into the conventional DSD system, and we know glass has challenges there”) and pointed to booming sales of its Honest Kids products (“it’s more than a third of our business and still growing… at over 40 percent”) as having a major impact on surging volume sales.

As for the next billion, it’s clear that the growth of Honest Tea, which achieved approximately $112 million in 2013 sales, has made it a bit easier for the brand to gain access to new suppliers, certainly moreso than in the first few years.

“They return our calls,” Goldman joked.